COMPLY-Schapiro's exit leaves broker fiduciary plan up in air

Nov 26 (Reuters) - Mary Schapiro's exit from the U.S.
Securities and Exchange Commission means more uncertainty for
Wall Street about a key reform that she championed: requiring
securities brokers who give advice to clients to act in their
clients' best interests.

The SEC's chairman has long made clear her support to
require brokers to follow higher ethical guidelines with
clients, known as a fiduciary standard. But Schapiro, appointed
to head the agency in 2009, will likely leave with the proposal
where it stands: stalled. Schapiro announced on Monday that she
would step down from the agency on Dec. 14.

"I have no doubt that Chairman Schapiro was quite sincere
that she hoped to achieve this as one of the hallmarks of her
tenure," said Barbara Roper, the director of investor protection
for the Consumer Federation of America, an advocacy group that
supports the measure.

At issue are the varied rules that apply to different types
of financial advisers. Financial advisers who register with the
SEC must act as fiduciaries, or in their clients' best
interests. But brokerage firm advisers, who register with the
industry's private regulator, the Financial Industry Regulatory
Authority, only have to suggest investments that are "suitable,"
based on factors such as a client's age and risk tolerance.

Brokers may earn more from some investment options they
pitch to clients, something investor advocates say could
motivate a broker to push a more lucrative product. Flat fees
that investment advisers charge, along with the different rules
they must follow, are more likely to prevent potential conflicts
of interest, say investor advocates.

Schapiro has tried to change that, with no success.

In 2009, she raised concerns about potential conflicts of
interest driven by certain broker compensation practices in a
public letter to brokerage firm chief executives.

"Some types of enhanced compensation practices may lead
registered representatives to believe that they must sell
securities at a sufficiently high level to justify special
arrangements that they have been given," she wrote. That could
motivate brokers to sell unsuitable securities or make
unnecessary trades to earn commissions.
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